Ladies and gentlemen, welcome to the Cembra full year 2022 results conference call and live webcast. I am Sandra, the call's call operator. I would like to remind you that all participants will be in listen only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Holger Laubenthal, CEO, Mr. Pascal Perritaz, CFO, and Mr. Volker Gloe, CRO of Cembra Money Bank. Please go ahead, gentlemen.
Thank you, operator. Good morning, everyone. It's great to be here, and yes, indeed, with CFO Pascal Perritaz and Chief Risk Officer Volker Gloe. Look forward to walking you briefly through the presentation and then take your questions, as just alluded to. Look, as usual, in terms of agenda, I'll briefly walk through the highlights for the year. We'll then have Pascal take over for the financial results together with Volker on the loss performance. Then we go into an outlook afterwards and take your questions. Page three, the full year performance.
Look, starting with this overview, I think it's in line with the update we've given you in the fall, in line with the Byjuno acquisition. I think you demonstrated strong performance in line with the committed targets that we've given you and that we've provided during the strategy update and then as we went through the year. Net income is coming in at CHF 169 million, up 5%. Continued revenue growth as well. We're pleased with that given the cards transition program, which we'll talk about a bit more later on. Net financing receivables up 5% as well. We're particularly excited that all businesses contributed to growth this past year. Your stable cost income ratio.
We've absorbed the investments that we also talked about into transformation as well as the Certo! cards family program launch and the transition. And then continued strong loss performance, which, you know, overall leading to quite robust and in line with guidance ROE figures. Of course, again, strong capital position. And again, this performance, we're proposing a dividend increase to CHF 3.95 per share. Next page, on the markets, again you recognize this page. Look again, you know, we've had growth across the board, which we're quite pleased with. Personal loans, 4% up, really focused on profitable growth. We talked to you about the price increases that we swiftly went to implement. Auto, like the business, right? Pretty much in line with the market.
Again, here too, quite strong pricing action that we implemented, you know, once the SME rates increased as well. Cards, solid in market share. Transaction volumes up 5%. Buy now, pay later, we're excited about this, you know, strong growth both organically as well as with the acquisition as we continue to build our strategy in this attractive segment. Overall, you know, strong execution and resilient performance across the board as we enter this post-pandemic world. On the next page, just, let me give you some highlights for 2022 in the context of our strategy. In terms of our core, pleased with the continued delivery of our credit factory.
You know, cost and risk discipline are key, and that's been going well last year as previously. In line with this discipline, we also tackled, as I mentioned, repricing actions quite actively since last summer. Our commitment to ESG remains strong, and we're pleased that it's being recognized. Operational excellence, you know, we launched a credit card app as we committed to. We started upgrading our underlying infrastructure. The MVP testing solution for the auto platform is out. Overall, this program is tracking well. With just under about a quarter of the investments made and initial benefits starting to come in. Business acceleration, as I mentioned, very pleased with the organic and profitable growth across the portfolio. The launch of the Certo! B2C cards proposition and transition has gone very well.
As we, as we speak today, we've migrated about half of the cards from the previous Cumulus portfolio into the new Certo! proposition. New growth I mentioned, right? Both organic growth and the Byjuno acquisition. That's going great, and the integration as well as we discussed with you in October, is tracking to plan. Last but not least, I think strong progress on culture. New leadership team's in place. We strengthened capabilities across the value chain, and we're excited that we've been recognized that we've renewed the certification of the Great Place to Work survey. Good testament also from our teams and associates. In summary, I think tracking well along the delivery of our strategy. Let me hand over to Pascal for the financial results.
Thank you, Holger. Good morning, everyone. We report today a strong financial performance for 2022, and we are pleased with both assets and revenue growth and net income results with all businesses contributing to this profitable growth. Let me explain. First, focus on the P&L and then in a few minutes more on the balance sheet. You heard already from Holger. Net income increased by 5% to CHF 169.3 million or CHF 5.77 per share. As a result, the return on equity came in at 13.7% at the upper half of the guided ROE range for 2022.
The total net revenues increased by 4% to CHF 508.9 million in 2022, driven by commission fees. The net interest income remained stable with interest, with increase in the interest expense from the change in interest rate environment offset by higher interest income. The commission and fees income increased by 17%, mainly driven by higher income from credit card fees, post-COVID normalizations, and growth in the buy now pay later business. For the buy now pay later on over fee income amounted to CHF 19.5, a +58% increase, and this include CHF 4.2 million revenues from the Byjuno acquisitions, which was completed on November 1st, 2022 and consolidated from that date. The share of net revenues generated from commission and fees increased to 30%. The loss performance remained very strong at 0.6.
My colleague Volker, Chief Risk Officer, will further comment soon. The cost income ratio remains stable at 50.6 in line with our guidance. The next page reports the profitability by source. The return on financing receivables or actually net margin further improved and achieved 2.6% in 2022. The increase is driven by higher credit card commissions and BNPL fees, partially offset by 0.1 percentage point reductions in the net interest margin. On the next page, let's talk about the net interest margin, respectively, the net revenues movement by breaking down the first and the second half of the year 2022. At H1 2022, as already reported in summer last year, the interest income reduced by CHF 2 million, driven by lower yields due to the business mix impact and competition.
This was partially offset by lower interest expense, mainly due to lower funding maturities. In addition, at H1, we benefited as well from increased commission and fees, mainly due to the post-COVID normalizations. For the second half of the year, the drop in interest income was reversed and increased by CHF 5 million, driven largely by timely as a repricing measures on new business since mid of the year 2022. This increase in interest income was largely offset by the increase in interest expense. Said differently, the net interest margin remained flat, as you can see, between H1 and H2, and we offset the increase of average funding cost with additional income in interest income.
For 2023, similar to the second half of the year, our plan is to offset further increase interest expense with additional income source, mainly from repricing measures. Slightly negative durations gap will contribute to defending the net interest margin. Credit cards. Credit card commissions. Let's talk about all this. We are pleased with the migrations of the transitions portfolio. Our credit card family, Certo!, was launched in July 2022 and is now the backbone for our business to consumer segment. At year-end, 38% of the overall card issue. As of overall card issues, I mean as of all of the B2B partners, Certo! portfolio, transitions portfolio. The 38% of the overall card issues came from our B2C segment, and we already migrated half of the transitions portfolio, as mentioned though by Holger.
We increased both our interest income and commission and fees for the full year as well as the second half of the year, which mean that the new propositions is well used and we are retaining the targeted customer segments as expected. On that basis, I'm pleased to confirm that the card guidance we gave as of for 2023 on with at least card assets and card revenues in line with pre-COVID level, will be achieved. Let's talk now about the operating expense. The operating expense increased by 5% with the cost income ratio of 50.6, stable as guided. The personal expense increased by 2% with number of full-time equivalents or FTE employees flat before the acquisitions of Byjuno. The increase was driven by salary inflations and increase in incentive compensations.
We had 12 employees from Byjuno acquisitions already integrated at year-end, and we will have around 30 FTEs based in the nearshore office in Riga to be integrated in these figures in the second quarter 2023, expected. The general and administrative expense increased by 7% to CHF 122 million, this is mainly due to the investment in strategic initiatives, operation excellence, and the launch of the Certo! as a proposition. Let's talk about these two items. Operation excellence. We announced during our investor day in December 2021 that we'll launch as of this program to further drive efficiencies and scalability in our operating model, ultimately it'll contribute materially to the improvements of our net margin over the strategic cycle. In order to deliver annual saving of CHF 30 million by 2026, we are investing CHF 55 million in operation excellence.
In 2022, we spent CHF 13 million or 24% of this multi-year investment program, OpEx and CapEx combined, and generated first annual benefits of around CHF 2 million. We launched the new credit card propositions, applications, to strengthen the customer relationship and increase efficiencies. The company as a data center has been consolidated and moved, the foundations for cloud infrastructure was established. The new IT platform for leasing business is being tested, the first release will be launched in 2023. Regarding the card migrations and cost, we invested around CHF 9 million for the entire product cycle implementations, development, customer cards replacement, and marketing associated to product promotions. You can see these extraordinary items and movements impacting the expect line, professional services, marketing, postage, stationery, and IT.
For 2023, we expect a stable cost-income ratio with continued investments in operation excellence in line with our strategic plan. I hand over now to Volker for an update on the loss development.
Yes. Thank you, Pascal. We report a loss provision for the year 2022 of CHF 40.9 million. Translated into loss rate, this stands for 0.6%, about the same level as last year. As highlighted already in the release of the half year earnings, there were some individual items that we could benefit from in 2022, although they actually link back to prior periods, such as a release of a COVID-related environmental reserve, or also a rather conservative view on the collectibility of certain assets that we had during the pandemic and that we could recover on now in 2022. An exact quantification of that would be difficult, I think a normalized number would probably rather be around 0.7%-0.8%, which we can still deem to be a very strong loss performance.
Asset quality remained robust in 2022. The NPL ratio came in at 0.7%, 30+ delinquencies at 2%. On the 30+ delinquencies, we see a slight uptick compared to the prior year, and there are two drivers that I wanna highlight. On the one hand, it can be attributed to the expected post-COVID normalization that we have been mentioning already in the H1 earnings release. It means that after opening up some of our credit policies in 2021, we also re-entered segments within above average credit risk, and that starts maturing now in 2022. Second argument that I would like to bring is the growth in the buy now, pay later business, including the consideration of the Byjuno acquisition in the numbers here.
This leads to a slightly worsening 30+ metric as buy now, pay later has an above average delinquency. This is just by the nature of the BNPL business model. It's a model that generates its income rather from volumes than on customer receivables, meaning that transactional customers are paying back their outstandings very fast. The book turns very fast. One might argue to what extent actually receivable-based metrics like delinquencies or even loss rates are sensible for a buy now, pay later business. For completeness reasons, it is included in the 30+ delinquency metric here and leads to a slightly higher value at the end of 2022. One other item that I would like to mention here is, and also that will be clear, it does not impact US GAAP numbers for 2022. It's the implementation of CECL.
As communicated before, the current expected credit loss or CECL model for the calculation of allowances under U.S. GAAP became effective in the beginning of 2023. The day one impact that affects the opening balance of 2023 is calculated at CHF 67 million, which is fully in line with the range that we have been communicating before. We said always between CHF 50 million and CHF 70 million. One more comment about the outlook on 2023. When we look into the expectations for the current year and considering both what we saw in 2022, but also the macro predictions for the current year, we should see a continued solid risk performance, where the loss rates continues to gradually normalize to the level of prior years and in line with previously communicated midterm targets.
With that, I hand it back to Pascal, who will guide us through the balance sheet.
Thank you, Volker. Balance sheet. The total net financing receivables at the end of the year amounted to CHF 6.5 billion or 5% increase. Overall assets increased by 46%, or CHF 157 million, and that include on one side as well CHF 33 million as a goodwill related to the Byjuno acquisitions, day one impact, and CHF 97 million as investment securities available for sales and repo eligible, in the context of our treasury management. Funding increased by 8% at end of 2022, largely in line with the growth in financing receivables and the liquid assets. Equity increased by 6% after Cembra paid the dividend of CHF 113 million in April 2022. Next page is on the financial receivables by businesses.
PLoan growth continued the second half of the year and increased by 4% for the full year to CHF 2.4 billion. As a result of lower opening balance of net financing receivables compared to 2021 and a continued competitive environment. Interest income in the personal loans business decreased by 4% to CHF 163 million, with a yield of 6.8%. The net financing receivables in auto lease and loan increased by 6% to CHF 3 billion in the reporting period, and interest income age up by 2% to CHF 133 million. Yield 4.6%, stable. In the credit card business, the net financing receivables rose by 1% to CHF 1 billion. Interest income in the card business rose by 5% to CHF 89.1 million, with yield at 8.5%. Funding.
Overall, the funding mix remained largely stable, 57% deposit, 43% non-deposit. The average funding cost in 2022 amounted to 50 basis points, compared to 2021, 45 basis points, and the period end funding cost increased to 79 basis points. The durations reduced, and with the expected interest rates hikes in 2022, our institutional investors tended to invest in shorter tenors, and the weighted average durations amount now to 2.1. 2.1 is slightly higher than the behavior last duration, so that we keep a slightly negative duration gap. SCR is at a healthy level, 326. What is it that the volatility of the figure is lower since the absolute figures in the high-quality liquid assets, as well as in the short liabilities are higher.
NSFR is lower as the two year sales maturities, 2022 drops below one year, and it expected as well to reverse in 2023. In the context of the placement of our transactions we had in January, CHF 235 million unsecured bond at a tenor of 6.5 years. Capital. We remain as very well capitalized, strong Tier 1 capital ratio of 17.8%. In 2022, as announced already, we implemented the current expected credit loss for statutory reporting as well, which had a one-off impact on the Tier 1 ratio of 0.7 percentage point. This is in line as with the indications we give of 0.6%-0.9%. The impact of Byjuno acquisitions on the Tier 1 capital ratio was 0.5%.
We also benefit for temporary as well exceptions, regulatory exceptions for quantitative regulatory supervisions for the binary operators. The obviously, the revised Basel III standards, consolidations concluded, but the final version is not issued yet. We expect also over time, starting in 2024, an impact of these new standards, adverse between 0.5%-1% of the Tier 1 issue. Shareholder equity ultimately increased by 6% after the dividend as well payout from last year. Given this robust financial performance, the board of directors will propose a CHF 3.95 per share dividend or 68% payout ratio at the next general meeting on April 21st, 2023, translating into a 3% or CHF 0.10 increase compared to last year. With that, I hand over to you, Holger.
Excellent. Thanks, Pascal. Look, as we move into the outlook section here, let me just briefly share our scorecard. You know, how we've done in 2022 on the key initiatives that we presented to you about a year ago. You recognize perhaps the left side of this page in terms of these initiatives. I'd say, look, overall strong progress, right? I think the key initiatives in operational excellence, we briefly talked about, I think, well underway. Business acceleration. Look, the main point for us and for me, and you may recall this from about a year and a half ago, that it was important for me that we return this business to growth.
We get the right energy on the commercial side, the right propositions for our customers, and we've been able to do that. We're quite pleased with that in terms of its growth. Obviously, a lot of these initiatives have contributed to that. That said, some areas here are also work in progress. Leading platform, the test version is out, and we're looking at a rollout for this year. Co-brand partners, we did launch a new relationship with Spar. We're also quite happy we extended a number of key relationships with Conforama and Fnac and others. This is, of course, ongoing, as we've always said, and we wanna do more in this space, continue to do more in this space going forward. On the cards transition. We talked about this.
We're very pleased with the progress to date and more to come as we come into 2023. Buy Now, Pay Later. Look, very excited. You know, I think we've laid a great foundation for delivering against our ambition here over the strategic cycle. We also briefly spoke about culture, the new organization in place, and the Great Place to Work re-certification. On the right side, and again, these are aligned with delivering against the 2022-2026 strategy. On the right side, the initiatives for this year. Clearly on the operational excellence side, ensuring readiness for cloud setup and the SaaS solutions on the core banking side. Importantly, we'll start decommissioning some legacy systems. It's obviously a key driver for efficiency going forward.
Business acceleration, we wanna drive more product diversification, personal loans, the leasing platform rollout we talked about, really continue to push the transition on the card side and leverage Certo! for new to bank customers as well. Buy now, pay later, concluding the operational integration, so we can continue to focus on growing that business that we're quite excited about. In conclusion, on the next page, in terms of the outlook. Look, as we've proven over the last years, right, I think a resilient business model that continues to deliver. You know, we expect the same going forward in spite of some of the market challenges that we've alluded to. Clearly for us, on a high level, right, we continue to be focused on executing on our strategy.
That includes also, you know, pricing measures and cards transition. Delivering on operational excellence and transformation, and then expanding our buy now, pay later and invoice payment presence in the country. In terms of performance, you can expect continued resilience going forward. Net revenues at least growing in line with GDP. As always discipline on cost and risk, as such, we're reiterating our expectations for the year. As for the targets through 2026, you can see them on the right, there's no change here, so that's the same that again, we presented in December 2021. This concludes the forward part of the presentation, we look forward to your questions now.
We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. You will hear a tone to confirm that you have entered a queue. If you wish to remove yourself from the question queue, you may press star and two. Questioners on the phone are requested to use only hands when asking a question. Anyone with a question may press star and one at this time. The first question comes from Daniel Regli from Credit Suisse. Please go ahead.
Good morning. Thank you for taking my questions. I have actually six questions, if I may. First, maybe quickly on your outlook for 2023, you say that you expect a net revenue growth of at least in line with the Swiss GDP. In the appendix slides, you also state that the Swiss GDP growth is about 1%. This sounds actually a bit conservative to me, given we potentially could see a continued normalization in traveling activity and so on. Can you maybe elaborate a bit more what drives you to kind of or what are the moving parts here if you look 2023 versus 2022? The second question is obviously on the Certo! credit card program.
You say that you have migrated about 50% of the previous credit card holders. Can you give a bit based on your experience and your research you probably did, can you give a bit of an expectation how we will continue from here? What is your expected final retention rate in terms of number of credit cards and or revenues? On buy now, pay later, obviously, we have seen a strong year-on-year increase even after deducting the Byjuno effect. Were there any special factors in this, or is this kind of the new level we should expect going forward? One question on net interest margin, particularly on interest expenses.
What can you talk a bit about your interest rate sensitivity, particularly on the interest expense, and what kind of interest expense uplift do you expect from the current rate situation? The second last question is on cost. Obviously, you had a lot of special expenses included in 2022 related to the operational excellence program and the Certo!, the launch of the Certo! program. Can you quantify a bit what part of the cost line you expect to be rather one-off in nature? The last question on credit card commissions, can you also here talk a bit about more what would have been the credit card commissions excluding the rebates and promotions you did on the launch of the new credit card program? Thanks.
Excellent. Excellent. Thanks, thanks, Daniel, and good morning to you as well. Good, good set of questions. Let me take the first three, then Pascal, I'll hand over for the other three for you. Look, outlook on growth, indeed, right? The, the forecasts are sort of, 0.7%, 0.8%, depending on who you ask, then SECO is predicting just under 1%. You're, you're right. In that sense, we deliberately said at least, at least, that rate. We also wanna be, you know, realistic and reasonable, though, right? There's a lot of volatility in the markets. We've previously guided in the strategy 2021 December, in line with GDP.
If GDP comes in at a lower point, then clearly we wanna be at least at that point and try to exceed that. That's the thought here. Certo, about 50%. Look, I mean, firstly, we're quite pleased with the progress that we've achieved here, right? I think we talked a lot about the transition program that we put in place. Talked a lot about the CRM campaign, the data segmentation, the targeted approaches in terms of customer communication and conversion. I think, you know, we're quite pleased that that's paid off. You know, we've previously guided on retaining at least half of that portfolio, clearly you should not expect us to stop here. On the contrary, we'll keep working this.
We've also guided in terms of credit card performance overall, that we wanted performance to come back to pre-COVID levels. All of these things remain intact. And I think ultimately, Daniel, you know, over time, I think, you know, we also plan to acquire new customers through the Certo! card as to other programs, right? At some point, I think, the delineation becomes a little, a little more fuzzy in a sense. You should clearly expect us to continue to work on this on this transition for sure. Buy now, pay later. You're right. I mean, look, we've had a strong year in that space. You know, we put this out as one of our strategic growth directions about a year ago.
We continue to be excited about it. I think both the organic growth and Swissbilling's been strong, as well as the combination with Byjuno. I think that really positions us well going forward. I would say a bit like what we said in October, right? We've given guidance on this to be CHF 10 million-CHF 20 million of net income by 2026. You know, where we sit today, I'd say we feel very comfortable that we'll hit that. That's the perspective. Pascal, the other three on interest rate sensitivity, cost side and card commissions. Do you wanna take those?
Thank you, Daniel. Good morning. Regarding the net interest margin and ultimately the interest expense. We reported an end of period funding cost of 79 basis points. Probably a reasonable assumption is an average net funding cost of around 1% as of in 2023. It's obviously very depending on how the capital market as a whole will develop. Clearly, we also expect as though to offset as though this increase in interest expense with additional income, mainly as of from the repricing as we mentioned. Next question is on the cost. For 2022, we had around I mentioned before, CHF 13 million OpEx, CapEx related to operational excellence. OpEx is in a range of CHF 9 million-CHF 10 million.
We then have as though basically CHF 9 million related as though to the cards. Look, ultimately as though we are guiding as though more on the cost income side. We expect as still as though to be stable cost income as though in 2023 in line with our strategy guidance. Clearly as though to start to see as though first benefits out of these investments, particularly as though in 2024 with the clear objectives by the end of the strategic cycle, 2026 to be below 40% or 39%. Finally, on the credit card commissions. Look, we don't disclose ultimately as though the details on all the loyalty costs. Our approach is very clear. We have set a guidance.
We want at least to deliver the card revenue as though from a pre-COVID level as though 2019. We are also building as though our propositions, our basically as though incentives, sales incentives on that basis. As I said before, I'm pleased to confirm as though the guidance set as though for the cards business as of for 2023.
Thanks.
Thank you.
Can I quickly follow up, on three points? First, when you say 1%, higher interest expense, does this mean like 1 percentage points higher cost of financing or like 1% higher interest expense on an absolute level?
I would.
And can-
Yeah.
Yeah.
Yeah. I would expect as though basically an average funding cost.
Mm-hmm.
Net funding cost so for this year, of around 1%, so you have to compare against.
The 50 bps we had. Clearly as a look, it's in the context of, as I said, as though it's highly depending on our capital markets. Our goals, our plan, as we said, is otherwise to offset an increase with additional revenues.
Okay. Secondly, quickly, again, on the guidance, on the revenue guidance for 2023, can you maybe just, you know, qualitatively give me some kind of bridge? You know, obviously we see higher, or we expect to see higher credit card transaction income, obviously also higher interest expense. What are other moving parts if we look into 2023 and compare it with the 2022? Where we'll be positive and where we'll be negative changes to the 2022 numbers?
Yeah, look, Danny, thanks for the question. Look, I think, on a high level, right? We've had good growth across the portfolio last year, right? Clearly our, you know, also our ambition there shouldn't change, right? We continue to want to grow the business.
That, by the way, counts for all product lines. No exceptions there. You know, we've had a good bounce back in fees and commissions, as Pascal talked about in detail. And yes, I would say, you know, the GDP forecast is clearly at the lower end, right? Again, that's why we said at least, you know, and that's the, that's where we stand on that.
Okay. Thank you.
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Good. Okay. Look, then let me just very briefly wrap up again. Thanks everyone for dialing in, for being available. It was a pleasure this morning. We'll obviously have plenty of opportunities to follow up in the next days. You know where to find us. I think from our side, you know, just to recap, sound business performance to continue to build on. We're quite pleased with the cards transition, with the progress and transformation. Pleased with, the ability to show growth across the business. We're, you know, poised to deliver on our strategic plan, the commitments. Strong, resilient business model, again, proven out. So, thanks for your time this morning, and we look forward to, more conversations coming up soon. Thank you.
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